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The Non-neutrality of Corporate Tax: An Entrepreneurial Perspective

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  • Filoso, Valerio

Abstract

While corporate taxation is a major issue in the debate over international finance, economic theory has no clear stance on who bears its burden. On balance, economists seem still more prone to accept that taxing profits does not affect corporations' outcomes. This paper makes three cases for non-neutrality. First, since corporate taxation is asymmetric between profit and loss, the tax rate may change the ranking of alternative investments. Secondly, the imperfect observability of the use of internal resources makes pure economic profits very difficult to detect. Thirdly, when the pervasive role of entrepreneurship is fully taken into account, corporate taxation appears clearly as a direct tax on market adjustments and as an indirect tax on wages.

Suggested Citation

  • Filoso, Valerio, 2007. "The Non-neutrality of Corporate Tax: An Entrepreneurial Perspective," MPRA Paper 4183, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:4183
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    File URL: https://mpra.ub.uni-muenchen.de/4183/1/MPRA_paper_4183.pdf
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    Keywords

    Corporate Taxation; Entrepreneurship; Tax Incidence; Austrian Economics;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian; Stockholm School
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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